Gold surged to 4-month highs above $1550 on Friday amid safe-haven buying. The upside extension brings the 1557.06 high from September within reach. The yellow metal was boosted after the U.S. targeted and killed an Iranian general in Baghdad with a drone strike.

The Iranians have vowed retaliation and that risk of escalation should keep a bid under gold into next week. Fresh cycle highs would shift focus to Fibonacci objectives at 1586.66/1587.37.

The United States Mint reported year-end 2019 sales data this week and not surprisingly the totals were pretty dismal:

Gold eagle sales were just 152,000 ounces in 2019, the weakest on record, going back to the start of the program in 1986. Sales were down a whopping 38.1% from the 245,500 ounces sold in 2018 and 7.3% lower than the previous weakest sales of 164,000 ounces sold in 2000.

Silver eagle sales were 14,863,500 ounces in 2019, down 5.3% from the 15,700,000 sold in 2018. That's the weakest annual sales total since 2007 when the Mint sold 9,887,000 ounces.

Interestingly, the weak 2007 sales also occurred in a rallying silver market. We all know what happened next: After a big sell-off, driven by deleveraging and sympathies to the broader commodities market, silver was off to the races. The white metal ultimately approached $50 in 2011.

That sell-off was a whopping 60%, from the Mar 2008 high at 21.34 to the Oct 2008 low at 8.41. To be clear, that all happened in the paper market. We hardly saw any physical selling in 2008. In fact, US Mint data show that silver eagle sales nearly doubled to 19,583,500 ounces in 2008! Annual sales ultimately reached a high water mark of 47,000,000 ounces in 2015, around when silver bottomed out at 13.64.

While gold rose 18.3% and silver rose 15% in 2019, clearly physical precious metals were out of favor (at least here in the U.S.) as investors were enticed by soaring stock prices. When those investors were inclined to diversify, they opted for ETFs and other derivatives rather than bars and coins. It all feels familiar...

In 2019, physical precious metals buyers in some states were also getting hit with sales tax for the first time. This comes in the wake of the 2018 South Dakota v. Wayfair Supreme Court decision, which is being interpreted by many states as an opportunity to force out-of-state sellers to collect sales tax on bullion and coins purchases.

I'm not sure the industry has fully assessed the impact of these new laws yet, but I'm guessing it is certainly impacting sales in some states. If you are an investor that decided not to buy physical metal because of the sales tax implication, or you are a seller of coins and bullion, I encourage you to join (or donate to) the Industry Council for Tangible Assets.


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